In the last decade, cryptocurrencies have seen a dramatic increase in demand. Currently, the total market capitalization of crypto is over three trillion dollars and Bitcoin’s trading platform price recently hit near double what it was at this time last year. This incredible surge has prompted an immense amount of investment from people seeking to be part of the sector – yet many are unaware or unconcerned about cryptocurrency’s negative environmental impact.
Activists have expressed their concerns about how cryptocurrency activities are causing lasting damage to our natural resources and ecosystems. Cryptocurrency mining can have a significant environmental impact, though not all miners are equal. To lessen the eco-footprint of cryptocurrency production, renewable energy sources and local climate should be taken into account. In this article, we will explore these issues further to develop viable solutions for a more sustainable future with digital assets.
Reasons behind the negative impact of cryptocurrency on the environment
Cryptocurrency transactions and the “mining” process that creates new coins both require a significant amount of energy. The exact energy requirements for different cryptocurrencies vary, with some requiring much less energy than others – Bitcoin being an example of one which is especially resource-intensive.
According to estimates, using Bitcoin takes around 2100 kilowatt hours (kWh) – equivalent to the energy used by an average US household in roughly 75 days. As most of this energy is supplied from non-renewable sources, cryptocurrencies like Bitcoin generate unacceptably high greenhouse gas emissions. Its annual carbon footprint is comparable to 97.2 megatonnes of carbon dioxide which is about equal to the entire country of Argentina’s yearly emission figures.
About Bitcoin Mining
Bitcoin mining is a process whereby participants use computing power to solve increasingly difficult mathematical puzzles to ‘win’ new Bitcoin. Satoshi Nakamoto, the creator of Bitcoin, designed this system so that as competition for cryptocurrency mining increases over time, mathematics becomes more and more complex – consequently requiring better technology to mine effectively.
As prices of Bitcoin rose and possible profits from it skyrocketed throughout the past decade, these cutting-edge technologies became essential tools to complete bitcoin mining. Miners now use sophisticated computer systems, called ASICs, that can solve the Bitcoin puzzle much more quickly per attempt. This increases their likelihood of being among the first to unlock a new batch of Bitcoins and receive rewards—but it also requires massive amounts of energy to power these computers.
ASICs are more energy-efficient than traditional computers, but they also require significant amounts of electricity to function and stay cool— typically accomplished by utilizing internal fans or air conditioning. These systems often need to run continuously, making them even more expensive to power.
Environmental Impact of Bitcoin Mining
Higher processing power drastically increases the chances of solving a Proof-of-Work, motivating miners to contribute computing power through either mining pools or mining farm facilities. In a pool, several miners join forces and use their powerful equipment together in an attempt to crack the puzzle. Benefits are distributed among them relative to how much ‘effort,’ i.e., computing power each miner has donated.
By contrast, a mining farm is composed of hundreds or even thousands of ASIC servers that continuously mine for Bitcoin. The concentration of these servers allows energy consumption to be reduced, as the specialised ASIC hardware was created with more efficient use of electricity in mind. Nonetheless, such farms still consume huge amounts of power.
Electricity usage for Bitcoin mining is growing each year- it currently consumes 91 TwH, accounting for roughly 0.5 percent of the world’s electricity consumption annually. This number surpasses the amount consumed by all of Finland in one year and it’s seven times more than what Google uses per annum.
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